FOB and CIF are the two most common Incoterms in international trade — and quoting the wrong one can cost you thousands of rupees per shipment. This guide gives you the exact formula, a worked example for an Indian exporter, freight benchmarks, and a free calculator.
What is FOB (Free On Board)?
Under FOB terms, the seller is responsible for all costs and risks until the goods are loaded onto the vessel at the port of export. Once the goods are on board, responsibility passes to the buyer. The buyer arranges and pays for ocean freight and insurance.
What is CIF (Cost, Insurance and Freight)?
Under CIF, the seller pays for ocean freight and marine insurance in addition to all FOB costs. The seller's responsibility ends when goods arrive at the destination port — but the risk transfers to the buyer once the goods are on board the vessel (same as FOB).
Key difference: CIF = FOB + Freight + Insurance. Under both terms, risk transfers to the buyer when goods are loaded. The only difference is who pays for freight and insurance.
The FOB Price Formula
+ Packing & Labelling Cost
+ Inland Transport to Port
+ Port Handling / THC (Terminal Handling Charges)
+ Export Customs Clearance & Documentation
+ Profit Margin
The CIF Price Formula
+ Ocean Freight (port to port)
+ Marine Insurance (typically 0.3% to 0.5% of CIF value)
Worked Example: 1 MT of Turmeric, India to UAE
Step 1 — Calculate FOB (JNPT Mumbai)
| Cost Component | Amount (USD) |
|---|---|
| Ex-factory cost (1 MT turmeric powder) | $1,200 |
| Export packing (food-grade HDPE bags, cartons) | $60 |
| Inland transport Mumbai factory to JNPT | $45 |
| CHA / customs clearance charges | $80 |
| Port handling / Terminal Handling Charges (THC) | $55 |
| Phytosanitary / health certificate | $25 |
| Bank charges / documentation | $30 |
| Profit margin (12%) | $179 |
| FOB Price (JNPT) | $1,674 |
Step 2 — Calculate CIF (Jebel Ali, Dubai)
| Cost Component | Amount (USD) |
|---|---|
| FOB Price (from Step 1) | $1,674 |
| Ocean freight JNPT to Jebel Ali (1 x 20ft container ~5 MT, apportioned to 1 MT) | $180 |
| Marine insurance (0.4% of CIF value) | $8 |
| CIF Price (Jebel Ali) | $1,862 |
CIF is 11.2% higher than FOB in this example. Always check if this is competitive with what buyers can source locally.
Ocean Freight Benchmarks (India, 2026)
| Route | 20ft FCL | 40ft FCL | LCL (per CBM) |
|---|---|---|---|
| JNPT to Jebel Ali (UAE) | $700–$950 | $1,200–$1,500 | $45–$65 |
| JNPT to Felixstowe (UK) | $1,800–$2,400 | $2,800–$3,500 | $90–$120 |
| Chennai to Hamburg (Germany) | $1,600–$2,200 | $2,500–$3,200 | $80–$110 |
| JNPT to Los Angeles (USA) | $2,800–$3,800 | $4,000–$5,500 | $120–$160 |
| Mundra to Singapore | $600–$850 | $1,000–$1,400 | $40–$60 |
Rates vary with fuel surcharges and season. Always get 3 quotes from freight forwarders. Rates above are indicative for 2026.
FOB vs CIF: Which Should You Quote?
| Factor | FOB | CIF |
|---|---|---|
| Who controls freight booking | Buyer | Seller (you) |
| Your price looks lower? | Yes | No |
| You earn on freight margin? | No | Sometimes |
| Preferred by large importers | Yes (they have own freight contracts) | Smaller buyers often prefer |
| Your risk exposure | Lower (ends at port) | Slightly higher |
Best practice: Always quote both FOB and CIF. This lets the buyer choose, shows you understand Incoterms, and often wins the order. Format it as: "FOB JNPT: USD 1,674 / MT — CIF Jebel Ali: USD 1,862 / MT"
Free FOB / CIF Calculator
Frequently Asked Questions
What is the difference between FOB and CIF?
FOB means the seller's responsibility ends once goods are loaded on the vessel at the port of origin. CIF means the seller also pays for ocean freight and marine insurance to the destination port. CIF = FOB + Freight + Insurance.
How do I calculate FOB price step by step?
Add: ex-factory cost + packing + inland transport to port + port handling charges + customs clearance + your profit margin. The result is your FOB price. A quick estimate: most Indian export FOB prices are ex-factory x 1.10 to 1.18.
Which is better for the Indian exporter, FOB or CIF?
Both have merit. CIF lets you control freight booking (often getting better rates) and earn a margin on insurance. FOB is simpler and lower-risk. Always quote both so the buyer can choose. Large importers usually prefer FOB; smaller buyers often prefer CIF because they don't have freight contracts.
How is marine insurance calculated?
Marine insurance is typically 0.3% to 0.5% of the CIF value (not FOB). For simplicity: Insurance = (FOB + Freight) x 0.004. Premium varies by cargo type, destination, and insurer.
Find Buyers Who Want Your Product at Your Price
Search EximHub's database of verified importers to find buyers actively importing your product in your target market — with their direct procurement contact and real import history.
Find Buyers Free